On 20 December 2024, the FCA introduced key amendments to the Non-UCITS Retail Schemes (NURS) rules via Handbook Notice 125. These changes, stemming from CP24/18, are designed to remove barriers to investment in Long-Term Asset Funds (LTAFs) and clarify rules around unregulated securities and liquidity risk.
For NURS managers, these updates represent a significant shift in how LTAFs and unregulated schemes are treated under COLL 5.6 and 5.7. Here’s a breakdown of the changes and how Galaxy by Funds-Axis supports compliance.
1. Removal of the 15% Restriction for LTAFs
Previously, NURS could invest up to 20% in CIS (including LTAFs), provided each second scheme did not invest more than 15% in other CIS – a rule designed to prevent circular investment.
However, LTAFs often invest via special purpose vehicles (SPVs) that qualify as CIS, making it difficult for NURS to invest in them. The FCA now acknowledges that the risk of circular investment is minimal in this context and has removed the 15% restriction for LTAFs.
Galaxy Impact: Galaxy will update its rule logic to reflect this change. Initially, UK-authorised LTAFs will be flagged to bypass the 15% check, with a full rule update following client consultation.
2. Clarification on the 20% Limit for Unregulated Securities and Schemes
The FCA clarified that the 20% exposure limit applies globally to any combination of:
- LTAFs
- Qualified Investor Schemes (QIS)
- Unregulated schemes
- Unapproved securities
This ensures that NURS do not exceed 20% of scheme value in these combined holdings.
Galaxy Impact: Galaxy will update its classification logic to include LTAFs and QIS under “unregulated schemes,” ensuring accurate exposure monitoring and compliance.
3. Liquidity Risk Oversight
Given the illiquid nature of LTAFs, the FCA has introduced new provisions requiring NURS managers to ensure they can meet redemption obligations. These align with existing rules for Fund of Alternative Investment Funds (FAIFs) and are intended to strengthen oversight and investor protection.
Galaxy Impact: Galaxy will introduce a new rule requiring manual approval for investments in unregulated schemes and unapproved securities. This will allow clients to assess liquidity risks before proceeding – many already have similar screening processes in place.
Stay Ahead of Regulatory Change with Galaxy
The FCA’s updates to COLL 5.6 and 5.7 reflect a growing emphasis on transparency, flexibility, and investor protection. Galaxy by Funds-Axis is built to adapt quickly to regulatory changes, helping NURS managers:
- Monitor exposure limits across regulated and unregulated assets
- Apply exemptions and flags for LTAFs
- Assess liquidity risks with configurable approval workflows
- Maintain audit-ready compliance across jurisdictions
Explore Galaxy Investment Compliance
Whether you’re managing UCITS, NURS, or alternative investment structures, Galaxy provides the automation, oversight, and flexibility you need to stay compliant.
